Play Updates, Monday, 06/02/2008

In Play Updates and Reviews

by James Brown

Call Updates

Peabody Energy - BTU - close: 77.52 change: +3.60 stop: 70.85

Coal stocks were on fire today after some positive analyst comments this morning
about the rising price of coal. One analyst raised their forecast on
metallurgical coal by 90% to $130 per ton in 2009 and to $250 per ton in 2010.
He also raised his price forecast on steam coal, burned to create electricity,
by another 25%. All the major coal stocks took off. Shares of BTU opened at
$73.75 and rallied to $79.00 intraday. Our first target is the $79.75-80.00
zone. We're adding a second
target in the $84.00-85.00 range but strongly
suggest that readers take some profits near $80.

GRMN really out performed the market today. The stock rallied 3.9% following
Friday's breakout over the 50-dma. The stock actually closed above the mid May
high. We are raising our stop loss to $45.95. Our target is the $54.00-55.00
zone or the 100-dma, whichever is hit first. FYI: The most recent data, which
may be out of date, listed short interest at more than 15% of GRMN's 114
million-share float. GRMN could still see a short squeeze. GRMN's P&F chart is
bullish with a $71
target.

We don't see any changes from our weekend comments. HSC current challenge is to
breakout past the May highs. We're not suggesting new bullish positions in HSC
at this time. Our target is the $64.50-65.00 range but more aggressive traders
may want to aim higher.

The Russell 2000 small cap index followed the rest of the market lower. We don't
see any changes from our weekend comments. We had been suggesting that more
conservative traders may want to exit or take profits in the $74.50-75.00 zone.
Right now our target is the $77.50-80.00 zone. We're not suggesting new
positions at this time. FYI: The Point & Figure chart's bullish price target has
moved from $87 to $96.

It was another bumpy day for oil prices but by the closing bell both oil and the
oil sector were higher. If we get the chance another dip in the $82-81 zone
could be used as a new entry point. NOV did provide a dip to $82.00 this
morning. More conservative traders might want to tighten their stops closer to
$80.00. Our target is the $88.50-90.00 zone. The P&F chart is bullish with a
$105 target.

This looks like a new bullish entry point in PCLN. The stock fell toward support
near $130 and traded there for most of the morning before finally beginning to
recover. The afternoon bounce looks like an entry point to buy calls. More
conservative traders may want to tighten their stops. The intraday low was
$129.80. Our target is the $139.50-140.00 zone.

PKX displayed some relative strength with a spike to $140.61 before settling
with a 1.7% gain. Shares are nearing our target in the $143.00-145.00 zone. We
are raising our stop loss to $133.95. This is an aggressive higher-risk play.
PKX tends to gap open every morning as it adjusts to trade in Korea. Plus, the
option spreads tend to be a little wide. FYI: The Point & Figure chart is
bullish with a $212 target.

TAP failed to make any progress but neither was it subjected to any serious
intraday sell-offs. We would consider buying dips to the $57.00-56.75 zone. If
you prefer to buy on momentum then wait for a new relative high (above 59.51).
Our target is the $64.00-65.00 range. FYI: The P&F chart is bullish with a $69
target.

Put Updates

Avalonbay - AVB - close: 98.83 change: -2.37 stop: 102.85

Investor concerns for the financial sector also influenced the REITs. Shares of
AVB lost 2.3% and the stock tested short-term support near $98.00. A failed
rally in the $100-102 zone could be used as another entry point. We have two
targets. Our short-term target is the 100-dma near $97.13. We'll use the
$97.25-97.00 zone as our first target to take some profits. Our second target is
the $92.50 zone. The Point & Figure chart is bearish with a $90 target. FYI: We
do qualify this
as a slightly more aggressive play because the REIT stocks like
AVB can be volatile and the option spreads are a little wider than normal. Plus,
the most recent data listed short interest at 16% of the 70 million-share float.

Right on cue shares of KSS rolled over but the 1% decline could be chalked up to
the market's weakness today. We remain bearish on the stock. We're suggesting a
tight stop loss. If we're wrong we should be taken out quickly. Our target is
the $40.50-40.00 zone. The P&F chart is bearish with a $35 target.

MMM displayed some relative weakness with a 1.6% decline but shares are still
above support. We are still waiting for MMM to breakdown under support near
$75.00. Our suggested trigger to buy puts is at $74.95. If triggered our first
target is the $70.25-70.00 zone. Our secondary target is the $66.00-65.00 range.
The P&F chart is bearish with a $69 target."

Strangle Updates

(What is a strangle? It's when a trader buys an out-of-the-money (OTM) call
and an OTM put on the same stock. The strategy is neutral. You do not care what
direction the stock moves as long as the move is big enough to make your
investment profitable.)

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Amgen Inc. - AMGN - close: 44.22 chg: +0.19 stop: n/a

AMGN managed to shrug off any market weakness but the stock's post-ASCO reaction
isn't very inspiring. The short-term trend is up and AMGN is trying to breakout
over its 100-dma. We are not suggesting new strangle positions at this time. We
have suggested a July strangle and a slightly more aggressive June strangle. The
options in the July strangle are the July $45 calls (AMQ-GI) and the July $40
puts (AMQ-SH). Our estimated cost for the July strangle was $1.65. We want to
sell if
either option hits $3.50. The options in the June strangle are the June
$45.00 calls (AMQ-FI) and the June $40.00 puts (AMQ-RH). Our estimated cost on
the June strangle was $0.56. We want to sell if either option hits $1.10 or
more. June options expire in less than three weeks.

MCD fell quickly this morning but found support near $58 and its 50-dma. We are
not suggesting new positions. We did not see any real headlines out of the
Goldman Sachs conference that MCD was supposed to present at today. The options
we suggested were the June $62.50 calls (MCD-FZ) and the June $57.50 puts (MCD-RY).
Our estimated cost was $1.10. We want to sell if either option hits $1.65 or
higher. More aggressive traders may want to raise their target. Keep in mind
that June options
expire in less than three weeks and will see their premium
erode more quickly.

Dropped Calls

Martin Marietta - MLM - cls: 115.97 chg: -0.72 stop: 114.95

We are giving up on MLM. The last few days MLM has managed to hold above support
at $115.00 and because of this more aggressive traders may want to hang on and
keep their stop under support. We're exiting early now to cut our losses. Almost
all of the short-term indicators are suggesting a breakdown and the stock
produced yet another failed rally under its 10-dma today.

The rebound in OII continues to struggle and shares fell under support at $70.00
today. The intraday low was $69.75 hitting our stop at $69.95 on the way. We
would keep an eye on OII. Watch to see if it bounces near technical support at
the converging 50 and 200-dma near $67.50-68.00.